Large investment houses are increasingly moving mid-level jobs out of New York City to lower-cost areas like Delaware and Utah, a practice known as "near-sourcing,’’ cutting costs for companies like Goldman Sachs while potentially eroding tax revenues for the world’s financial capital.
“Places like New York or London will remain financial centers, but most of the players are taking a much harder look and asking whether they can move large numbers of jobs,” said James Malick, a partner at the Boston Consulting Group who advises banks, the New York Times reported.
Low-level jobs have already moved to back offices and call centers in overseas countries like India. Now midlevel services like accounting, legal support, trading and human resources are being shifted to places like Salt Lake City, North Carolina and Jacksonville, Fla., experts say.
The migration of jobs may have a big impact on New York’s tax base and economy because of Wall Street’s high profile. Last year, the finance industry accounted for 14 percent of New York State’s tax revenue.
After peaking at 213,000 in August 2007, securities industry jobs in New York state fell more than 15 percent following the financial crisis, according to Labor Department data. Since then, the industry has regained nearly 12,000 jobs to the 191,200-level, still below pre-recession levels. In the same period Delaware picked up 1,300 securities jobs and Arizona gained 2,600.
Goldman’s employees in the New York area have held at just over 10,000 since the end of 2009, while full-time employees in Salt Lake City have doubled to 1,400, making that office Goldman’s sixth-largest globally, the Times said.
The loss of middle-tier jobs in the financial sector is also taking place in other global financial centers. Goldman Sachs President Gary Cohn told analysts in May the firm could save 40 percent to 75 percent on job-related expenses by moving employees from hubs like New York, London, Tokyo and Hong Kong.
More than a third of Goldman’s hires since early 2011 have been in cities like Salt Lake City, Dallas, Bangalore, India, and Singapore, Cohn said, according to the Times.
Some employees are declining offers to move. Garry Douyon, made nearly $100,000 a year helping to process trades and working with clients and traders at Royal Bank of Scotland in Stamford, Conn. He decided to stay in the New York area when the firm offered him about $60,000 to move with his team to Salt Lake City.
“I liked RBS but I have my roots here, I have a home, I have kids in school,” said Douyon, who is working on a biodiesel fuel startup with some former RBS colleagues.
Some states are providing banks with incentives to relocate their employees. Delaware has pledged to pay $10.1 million in incentives to JPMorgan Chase for moving 1,200 jobs there, the Times reported.
Still, New York will continue to be a financial hub, with the state’s share of total securities jobs in the U.S. holding steady at about 24 percent in recent years.
“Even as the securities industry goes through a difficult time, New York remains the financial capital of the world,’’ said Thomas P. DiNapoli, the New York State comptroller. "I don’t see that changing anytime soon.’’
Banks in Europe, where many countries are in recession, are in full job-slashing mode.
RBS plans to cut 618 financial advisers in the U.K. while creating 351 financial planner jobs as a result of regulatory changes, Bloomberg reported last month.
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